Take, as a starting point, the Stern Review‘s numbers. They were on the high side when the review was published in 2006, but a lot of the green consensus since then has converged toward them. As detailed on PDF-p. 20, the expected cost of unmitigated climate change is 20% of global GDP. The implication is that the optimal carbon tax today should be 20% of global GDP – we should be willing to reduce income by 20% now to avoid a permanent 20% reduction in income in the future. Global emissions intensity today is about PPP$2,400/t-CO2e ($127 trillion/53.5 billion t-CO2e), so the carbon tax should be $480/t, right?

But in reality, we should be willing to accept a much higher carbon tax. The reason is that the money raised by the carbon tax is not ejected into outer space. It circulates in the world economy. If a carbon tax is used to offset other taxes, or to pay for new government spending, then the same amount of money stimulates the economy. If it is used to reduce the deficit, then in the long run this stimulates some investment. The money is shifted rather than thrown away.

There is some cost to the carbon tax, but it is much lower than its face value. The cost is the economic loss from shifting consumption to carbon-free products, at the prices of a world in which greenhouse gases are not taxed at all. This is similar to the cost of a tax on cigarettes or alcohol or really any other product – the money is spent on less harmful activities.

The point is that the zero-carbon lifestyle that I advocate as the future is not one of penury. Evidently, so many people enjoy living in dense cities where cars are not necessary that those cities are very desirable. Cities like New York and London, which offer high-wage jobs and comfortable public transportation but aren’t building enough housing to accommodate the tens of millions of people who wish to take advantage of their opportunities, are very expensive to live in. The current zoning regimes in the US, and to some extent even in Europe, act as a negative carbon tax, making it harder to not emit greenhouse gases – this should be reversed, replaced with zoning liberalization and a positive carbon tax.

What’s more, the money saved by not having to drive goes to other forms of consumption. The proportion of income spent on transportation is lower in areas with good public transit than in ones without. Even taking subsidies into account, the operating and equipment costs of New York City Transit are about comparable to the depreciation cost of the cars that one would need to buy for New Yorkers to match the auto usage of the rest of the United States – and car purchases are just 40% of American auto spending, the rest going to fuel and spare parts. This saving is plugged into other kinds of local spending, such as going out to eat. In cities with more modern housing stock than New York this also includes better-accessorized housing. It may also include higher spending on consumer electronics.

What’s true is that not everyone wants to live that kind of future. Some people enjoy driving big cars and keeping the lights and temperature control in their large houses on even when they’re not at home. They will not be able to do so in any realistic green transition, and that’s a real cost. Some people even object to solar power and energy-efficient devices on culture war grounds, and they too will have to adapt to a culture they dislike, just as so many immigrants have. But the alternative lifestyle they will need to adapt to is one that so many comfortably middle-class people choose even at the current carbon cost of $0 that the imposition is not so onerous.

There are still remnants of people who define themselves by the environmental and health hazards of previous generations. Europeans and Japanese still smoke at pretty high rates, as do some subcultures in North America. We can expect that likewise, some people will keep driving at €2/liter fuel, at €3/liter, at €5/liter, and define themselves by not shifting to public transportation or even buying an electric car. But they will be marginal as the bulk of the population shifts to greener consumption, and if squeezing out the last remaining carbon emissions requires regulatory bans, not too many people will mind, just as people no longer mind restrictions on cigarette advertising.

So raise the fuel tax, early and often, and cut other taxes, and spend some of the difference on solar power and public transportation. And make it easy for people to move to big, dense cities by building more housing there. Maybe start worrying if the deadweight loss assuming there were no such thing as climate change grew beyond the cost of greenhouse gas emissions, but the carbon tax required to get there is such a large multiple of the cost of carbon emissions that by then the world would go zero-carbon. Do what you can to limit climate change to non-catastrophic levels, and keep raising carbon taxes and spending on alternatives to get there.

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The reason is that the money raised by the carbon tax is not ejected into outer space. It circulates in the world economy.

Exactly. As I recall (I have the Stern Report at home) both the Stern Report and the Australian version, the Garnaut Report, calculated that it would be a significant boon to the economy, far from a drag. Green energy employs more people and puts the money thru workers pockets who spend in the real economy rather than existing energy sources which is Big Capital and often international in nature, siphoning up (the opposite of trickle down) to the ultra-wealthy and away from local communities or states. Of course this is exactly why the wealthy and the rightwing media (Murdoch et al) are so frothing-crazy opposed to it. Though, at the time of his passing we should note even previous fossil-fuel barons can see the light (or wind): T. Boone Pickens died yesterday.

I’m not the person who made that comment, but my interpretation would be that employing people is a major cost, and it is a cost that is likely to grow due to Baumol cost disease (because the value of labor keeps rising as people keep finding newer and more valuable ways to contribute to the world).

But I would think that if two options have the same total cost, and one has that cost due to high labor and low materials, while the other has that cost due to high materials and low labor, then at least in the short run, the former is likely to have better distributional implications. But in the long run it will likely grow more expensive so the two will no longer equal out in total cost.

In 2009 (in the midst of “The Big Short” recession), Universidad Rey Juan Carlos published a benchmark study of how the Spanish economy was hurt due to energy decisions. 1) For every alternative energy job created, 2.2 jobs were lost elsewhere due to higher energy prices. 2) The average government subsidy to create a green job was $800,000. The average government subsidy to create a wind energy job was $1.4 million. 3) Each green energy megawatt cost 5.2 jobs elsewhere in the economy. 4) It cost Spain an additional $10 billion from 2000 to 2008 over the cost of carbon energy to use green energy [Spain offered high net metering rates for customers who put energy back into the grid. So, people would buy a solar panel, get the new net meter installed, and then they made money using a gasoline generator to drive power back into the grid.]

Aside from the hogwash scaremongering nonsense data attested to, the gas generator fairy tale problem has an easy fix.
institute a €10,000 fine for every instance, fine can be levied daily, if necessary. Chilling effect should take care of the rest.

If it takes more people to generate the same amount of energy, productivity in the energy sector is lower. Lower productivity results in lower standards of living. Since more people are required to produce a given amount of energy, either less energy is produced or people need to be diverted from other productive employment to produce energy lowering output in other sectors. Either way, energy becomes more expensive.

The econocrats have come out in force!
That is an abuse of “productivity” by totally ignoring the negative externalities of non-green energy, which in a worst-case scenario could be existential for human civilisation, but which assuredly already has huge negative public health effects in places like China and India.
Also, while wind and solar have relatively high labour compared to fossil fuels, they are still quite low in the context of the economic activity involved. There is almost nothing to be gained by any efforts to drive it lower.

>> Since more people are required to produce a given amount of energy, either less energy is produced …

Yep. That is a feature, not a bug. We use less energy. In the short run, this means more jobs (and more costs). In the long run, it means less jobs (and less cost). Weatherize your house and you don’t need to do it again. Build good mass transit and you don’t need to keep building cars all the time. Businesses that use very little energy aren’t dependent on the energy producers, and thus able to focus on their core skills. Cheap energy is not a good thing in the long run, even if it enables a good economy in the short term. It is better to build your house out of bricks, not straw.

Yes, or from another perspective – It’s the broken window fallacy. Break some windows, you create a job for a window repairman, right? Incorrect, one more person is working but the overall goods humanity gets to enjoy did not increase.

However, while breaking windows will not grow the economy, it might make the distribution of money more equitable – break a rich person’s window, and another working-class repairman is employed. This is what lies behind all the “creating jobs” (and much other) politics nowadays – redistributing money to the lower classes at the cost of lower overall GDP. Whether this is a good thing depends on how much inequality is decreased at the cost of how much GDP. One would hope that it would be possible to redistribute money without lowering GDP, but apparently that’s difficult.

Productivity drops if you only look at GDP. One of the flaws of GDP, however, is that it doesn’t capture externalities that have no price such as pollution or a population’s health. Overall welfare is hard to measure but it is what counts in this discussion.

Arguably, welfare is increased by green energy thanks to lower pollution and improved well-being. Whether that is worth the cost of increased employment per unit of electricity probably depends on individual preferences.

Carbon taxes are a way to make the negative externalities of CO2 emissions count towards GDP by giving them a price. Ideally, government sets that price such as to represent the value an average voter assigns to resulting externalities.

If the most environmentally friendly option were also the cheapest, that is what would be done and there would be no controversy.

You are correct that we need to consider the trade-off of mitigating environmental harm.

Some environmentalists try and deny the existence of trade-offs, arguing that green policies are economically better with logically flawed arguments like ‘it employs more people to do activity X in an environmentally friendly way.’

Isn’t one of the main argument against carbon tax is that it is regressive tax?
It will hurt poor car owners more than rich car owners.
Also won’t carbon tax make diesel buses and trains more expensive to run?
Yes, I understand that electrification of buses and trains is the goal but it will take for full electrification.

Electric city buses are getting cost-competitive right about now. Diesel long-distance intercity buses will see their demand rise (where trains don’t exist as an alternative), as they will be *more* affordable compared to cars.

People who like governing more than they like throwing rocks at storefronts recognize that car owners outearn non-owners, and that the cost of air pollution is borne by the poor much more than by the rich. In the American income distribution, the proportion of household spending going to fuel is constant, about 3.5%, in the bottom nine deciles.

Absolutely none, if driving is so important to them they can drive slower. The reduction in fuel consumption from driving at Macron’s new non-autoroute speed limit of 80 rather than 90 would offset the cost of more expensive diesel. Their response to the new speed limit was to vandalize speed cameras, leading to a one-time increase in traffic fatalities of about 40, before the cameras were repaired and traffic deaths came back down to trend.

Suburbanization of poverty is a very real problem in the US, catching up to Europe. The people driving from Pittsburg or Antioch to San Francisco are less able to bear the cost of a carbon tax than their wealthy SF counterparts. Zoning is a hyper-local issue while a carbon tax would probably be a federal one. How do we tie a carbon tax to not only building more transit but also creating neighborhoods that they can viably serve?

If you look at the composite average of the top 50 US metros, poverty is down within 2 miles of city hall while it’s up everywhere else since 1990. The pattern is pretty clear that the income gains in the last generation are occurring in closer in to city halls, while further out is stagnated or declining… obviously with some variations metro-by-metro.

I know, and they’re a majority of the left in Berlin and there’s a very good chance that I’m leaving after my lease runs out in April because I don’t want to live here anymore, regardless of career issues.

It may be a regressive tax. But you have to consider the alternative. Will unchecked carbonization be a progressive or a regressive hit to the world economy? Is the carbon tax more regressive than *that*? Can strict bans on certain products achieve equal decarbonization in a less regressive way?

Regardless of whether or not the gas tax is regressive (and in the US it probably is), we in the US have been giving ourselves a gas tax break equal to inflation every year for the past twenty-five. Between our failure to peg gas taxes to inflation and gas mileage increases (which I assume benefit upper middle class folks in Priusi over poor people who drive clunkers), America’s relatively well-heeled suburbanites and exurbanites–many of whom live in ridiculously white neighborhoods because of a legacy of white flight and redlining, and heterogeneous communities due to a legacy of homophobia–have benefited from what is essentially a regular series of gas tax breaks even as the bus and rail fares paid by the rest of us rise with inflation.

Something needs to give, because–even without the need to fight climate change–straight white wealthy America flat out stopped paying for its infrastructure years ago, even as it dumps the true cost of environmental degradation on the poor.

I’m all for returning much of the proceeds from higher gas taxes back to the poor in pretty much any form at all, including straight up reparation payments to the black, brown and queer working class.

A tax like this would also dramatically increase the cost of operating electric trains/buses, given how little of electricity production is currently carbon-free. Compared to electric trains power by coal, diesel trains actually have a lower carbon footprint. High speed rail makes the carbon footprint even worse. Presumably the tax would accelerate the move to lower carbon electricity generation but that would take time.

If we add a regressive tax (say, a gas tax) to our regressive state & local tax policy frameworks, the only way to know if we made our tax policy more regressive to look at the slopes of the tax functions. Since gas taxes are less regressive than most favored state & local revenue alternatives, the addition of a carbon tax would probably make tax policy less regressive, even it’s a somewhat regressive tax.

And, inherent in any regressive tax critique, is that the assumption that regressive tax policy is universally bad, which is suspect at best. 1. Income itself is a squishy value to base anything off of. 2. Lots of things seem reasonable to be taxed based on something other than a function of income.

What’s needed is not a tax which equals the harm “no action” on climate change would do, but rather a tax which is high enough to prevent that harm in the first place. This level is probably much lower than $480/ton.

I doubt a $480/ton tax would be high enough to avert harm. For example, France has a gasoline tax of 0.651 euros per liter. This corresponds to $302 per metric ton of carbon dioxide emitted. France has much higher public transportation rates than the United States, but it doesn’t have the near universal level of adoption of electric vehicle transport to be carbon neutral. In fact, France’s carbon emissions are barely lower than the worldwide average (worldwide 5.0 tons per person, France 4.6 tons per person).

So other developed countries reduced their emissions to France’s level, worldwide emissions will stay about the same as poorer countries develop their economies and emit more CO2.

Also, France is only able to achieve their low emissions levels (for a developed country) by large adoption of nuclear energy. This is politically unlikely in many countries, and would create proliferation concerns for some (e.g. Iran).

In fact, France’s carbon emissions are barely lower than the worldwide average (worldwide 5.0 tons per person, France 4.6 tons per person).

That is a truly ridiculous comparison because lots of countries have very low rates due to their undeveloped societies, eg. Central African Republic has 0.1. Even India and Indonesia have quite low per cap amounts, despite having quite dirty coal power because a low proportion of their big populations are even on the grid or have much consumption if they are. Below is a more sensible comparison of a selection of rich countries, for 2017. France is one third that of US and 54% of Germany. The rich countries lower than France have both hydro and nuclear, though curiously Norway is highish. These data don’t include methane which would make some of these (including Norway & US) higher still. France is higher than one might expect (ie. from their 75+% nuclear grid) presumably due to being the largest country in EU and thus more km driven.https://en.wikipedia.org/wiki/List_of_countries_by_carbon_dioxide_emissions
(from http://edgar.jrc.ec.europa.eu/overview.php?v=booklet2018)
Tonnes per cap p.a.
Switzerland 4.7
World 4.9
Sweden 5.1
France 5.2
Portugal 5.5
United Kingdom 5.7
Denmark 5.9
Italy 6.1
EU-28 7.0
China 7.7
New Zealand 7.8
Israel 8.0
Ireland 8.2
Austria 8.3
Poland 8.4
Finland 8.5
Norway 8.8
Belgium 9.1
Singapore 9.6
Germany 9.7
Netherlands 10.3
Japan 10.4
Iceland 12.2
Russia 12.3
South Korea 13.2
United States 15.7
Australia 16.5
Canada 16.9
Saudi Arabia 19.4
UA Emirates 21.6

Norway is an oil exporter, and the production of oil creates a lot of emissions. For the same reason, Nigeria emits 2.5 t per capita (link) despite having a very weak economy.

In France this goes the other way: France is one of the least industrial developed countries – it might be the least industrial non-English-speaking one – so much of the emissions of its consumption is attributed to industrial exporters like China or Korea.

Alon wrote: Norway is an oil exporter, and the production of oil creates a lot of emissions. For the same reason, Nigeria emits 2.5 t per capita (link) despite having a very weak economy.

Yes, but those are not counted in that particular database; and methane is not counted at all (a bit of huge omission but possibly because it is so problematic to measure/estimate):
“The data only consider carbon dioxide emissions from the burning of fossil fuels and cement manufacture, but not emissions from land use, land-use change and forestry. Emissions from international shipping or bunker fuels are also not included in national figures,[1] which can make a large difference for small countries with important ports. … Other powerful, more potent greenhouse gases, including methane, are not included in the data of this article.”

Michael, maybe you could clarify what aspect of my comparison you find ‘ridiculous’ because I am unclear on that.

To clarify my own original point, I wasn’t arguing that a $300 carbon tax would have no impact on developed countries carbon emissions. France has much lower emissions than most developed countries as you note.

My point was that a $300 carbon tax in developed countries isn’t sufficient to avoid harm. Without the tax worldwide carbon emissions will continue to grow. But I suspect a tax at that level in developed countries would only stop the growth of worldwide emissions, with the fall in emissions in developed countries completely offset by emissions growth in developing ones.

You can’t be asking for a zero-emissions future, because that involves and end to respiration. Presumably what one wants is a future at which the emissions produced don’t cause as much harm as the benefit created by the purpose the emissions serve. For that, what you need is a tax on emissions that equals the harm caused by those emissions, so that the only people who choose an emitting activity over a non-emitting activity are ones that get more benefit from using the carbon option over the non-carbon option than the total cost their emissions impose.

You used France and USA in the same sentence/para/argument based on that false comparison. If the US were to reduce to France’s emissions it would be highly significant for the world total. I also think that France will be a leader in seeing e-vehicles displace ICE over the next decade or so. Unlike Germany which is still building coal-fired generators, France is closing down it few remaining ones.

As you say, for political reasons nuclear may be a non-starter but even on simple economists they say that it could only be viable with a carbon tax of $100/t.
Setting an absurdly high carbon tax to make CCS viable is just crazy. We should be using carbon tax to encourage already clean energy and it doesn’t need anything remotely like that.

Jonathan Salmans, 2019/09/13 – 21:48
That’s right Herbert. Or to put it differently humans are carbon neutral because they are powered by biofuel (e.g. food).

I assume you are making a joke but just in case …
As hunter-gatherers it might have been true but not when we drive 2 tonne metal boxes to the supermarket and we ship and truck and fly food thousands of km around the world, and destroy rain forests to plant palm oil plantations, or grow massive amounts of corn to feed cattle for us to eat, and deplete the oceans of any edible protein to be found … And use massive refrigeration to store it all. Massive amounts of plastic and metal to package it. Use lots of gas and electricity to cook it.
Oh, and on top of all that, we in the west go and waste about one third (sometimes 50%) of food that ends up in landfill where it produces methane that leaks to the atmosphere 99% of the time.

Since this article and comments appeared, a significant report on global methane emissions has come out. And it’s shocking. Many have long suspected that the (fracking and oil & gas) industry were always underestimating methane leakages (so called “fugitive emissions”) but, as I mentioned above in earlier posts, it is tricky to measure and the industry doesn’t help; it turns out they were right.
(To remind people, methane is a more powerful GHG than carbon dioxide, and is usually considered 20x; the gas is actually closer to 50x CO2 but is shorter-lived in the atmosphere so normalised to about 20x.)

https://nature.us17.list-manage.com/track/click?u=2c6057c528fdc6f73fa196d9d&id=8012026c63&e=3246451018
April 2020
Atmospheric methane reaches all-time high
The concentration of methane in the atmosphere has reached an all-time high. Data from a network of sampling stations operated by the US National Oceanic and Atmospheric Administration (NOAA) show concentrations of the potent greenhouse gas are rising, with an accelerating rate of increase. Methane comes from natural sources, such as wetlands, and from human activities, including oil and gas extraction and livestock farming. “Here we are. It’s 2020, and it’s not only not dropping. It’s not level. In fact, it’s one of the fastest growth rates we’ve seen in the last 20 years,” says climate scientist Drew Shindell.
Scientific American | 4 min read
Read more: Methane leaks from US gas fields dwarf government estimates(Nature, from 2018)
Reference: NOAA report

Even so, given the economy’s steady growth, future generations will be much richer than ours. A dollar has more utility for us than it does for them. So we should not spend a dollar now to save a dollar in the future.

Eric that is not is what is being proposed. It is spending 10% of GDP now to save 10% later which will obviously be more in terms of value. The rate of return takes the effect of money being worth less when you are richer into account.
Alon I have never heard of r=g. Why should they be? Even if g=0 like most of history, there is still pure time preference.

Because r > g involves risk, and the risk-free returns (e.g. on American or German government bonds) are sometimes even less than g.

When g = 0, r was pretty high, because the constant warfare, arbitrary seizure of property, epidemics, etc. that characterized the premodern world both reduced growth and made long-term investment difficult.

Given that recapture is already economically viable at $600/tonne, and you’re advocating for a carbon tax “much higher” than $480/tonne- isn’t this just proposed social engineering to build the kind of future you prefer, irrespective of climate reality?

No. That is, yes there are all kinds of schemes but none with either proven or energetically or logistically viable. Almost all (in fact, all) would involve as a first step, carbon-capture using the current relatively simple chemical means. But it is awfully inefficient and itself consumes so much energy that it becomes self-defeating. There isn’t any economically viable CCS going on in the world outside oil-rigs, where there is no need to “capture” very dilute CO2 or methane, and the sequester site is metres away, and the increased efficiency of oil/gas extraction is what pays for it; none of these conditions exist for 99.9% of where the GHGs are produced.

I have no problem with that kind of R&D but seriously doubt it will lead anywhere, mostly because of the scale issue, which is largely related to the dilute gas issue. For example the mineralisation approach requires both CC then injection into appropriate geological strata using a fracking process; even then it is not clear if it will need geological time periods to bring down enough carbon! The entire point of the biological approach is that these two issues are not limiting, and are “solved” essentially for free (and its efficiency is plenty). And more than that, they are proven and indeed are the main drivers of a low-CO2, high-oxygen atmosphere that allows most vertebrates to live on our planet. Engineers and for that matter non-engineers tend to look to technology for solutions but, seriously, nothing we do in tech comes remotely close to what biology has evolved to do. Look at your own body: it has gone from a single cell to 37 trillion cells, including the most complex known entity in the universe (our brains) in a short time period. (It is probably more relevant to talk about a big tree, or maybe one of those Sargasso sea algal blooms of 20 million tonnes.)

The March 21 2014 article in Science “Iron Fertilization of the Subantarctic Ocean During the Last Ice Age” (link &B abstract below) documents a reduction of atmospheric CO2 from 290 to 190ppm (equivalent to removing approx. 150 billions tonnes CO2) thanks to natural iron fertilisation caused by dust blown off the southern continents during an arid phase of global climate.

Abstract
John H. Martin, who discovered widespread iron limitation of ocean productivity, proposed that dust-borne iron fertilization of Southern Ocean phytoplankton caused the ice age reduction in atmospheric carbon dioxide (CO2). In a sediment core from the Subantarctic Atlantic, we measured foraminifera-bound nitrogen isotopes to reconstruct ice age nitrate consumption, burial fluxes of iron, and proxies for productivity. Peak glacial times and millennial cold events are characterized by increases in dust flux, productivity, and the degree of nitrate consumption; this combination is uniquely consistent with Subantarctic iron fertilization. The associated strengthening of the Southern Ocean’s biological pump can explain the lowering of CO2 at the transition from mid-climate states to full ice age conditions as well as the millennial-scale CO2 .

There is a consistent pattern across the entire US: a green, low-carbon urban core and a deep red, carbon intense suburban sprawl around it, fading out into low-carbon living in the countryside. The difference is most apparent in cities like New York or Chicago, but persists even in auto-oriented cities like Atlanta.

From what I’ve seen this is pretty consistent across the world: the only study to the contrary that I’m aware of is one that found greater carbon consumption in the core of Helsinki compared to the outlying areas, but the authors find that this is entirely explained by the wealth effect: those living in the core are wealthier, consume more, and are hence responsible for more emissions. Control for that and the city remains bright green (Heinonen, Kyro, & Junnila 2011).

Unfortunately your average suburbanite looks at his green lawn and can’t imagine that his suburban lifestyle is in fact more carbon-intensive than that of the average metropolitan, which he imagines to be either an inner-city Chicago kid or an uppity Manhattanite. Never mind that the lawn is just as likely to be a carbon source thanks to maintenance, but that’s a separate matter.

Demand for fuel for transportation is quite inelastic, as it is just so hard to replace. However, for fuel för heating and electricity this is not the case at all. The tragedy with climate change is that most countries are undertaxed (with a too-high tax burden coming from income tax), so adding a carbon tax on power generation, would probably literally have a positive effect on GDP if it is offset by lower income tax. Natural gas, coal, and oil all also are based on very centralized infrastructure, so it would be very easy to tax (unlike income…). If done globally there would be no free-riders and it is really just a collective action problem, not a technological or public policy challenge.

A true global carbon tax of $100 would almost certainly be enough to force a rapid shift to renewables globally (and towards higher energy efficiency). No new coal power would be built under such circumstances (though perhaps som gas plants). For meaningful impact on personal transportation much higher taxes are necessary, but electrification for cars is probably close to being viable in high-tax EU settings already (maybe some further investments in charging infrastructure is necessary, another €0.10 to €0.2 fuel tax / litre, and another 3-4 years of price declines in vehicles). Shifting the final 25% of carbon emissions from transportation fuel emissions should, in any case, be quite low in the priority list if one wants to fight climate change with minimal economic impact.

This article (link below) might be of interest, from yesterday’s The Conversation. Quiggin is an academic economist who trends progressive (the Murdoch press pours hate on him) who may be known internationally by his book on the GFC Zombie Economics: How Dead Ideas Still Walk among Us. This paper is Quiggin’s response to a new, deja-vu all-over-again, campaign for nuclear power in Australia, by a relentless series of articles in Murdoch press and some political third-raters. However, though the logic may be perfectly correct I think his real purpose is to try to get the conservatives, and even with the backing of Murdoch, to institute a carbon-tax, ie. it’s really a pretext. I don’t think it will work but it is a nice finessing of the idiots who deny clean energy and want to embrace nuclear (while also seriously proposing that the feds directly fund new coal-fired generators, because the banks won’t!). Of course a carbon-tax, that Labor introduced but which lasted only 1 year before the cons regained power and Tony Abbott immediately cancelled, would most support most existing green power (solar, wind and PHES).

The agreement to construct Hinkley [UK nuclear plant to be built by the French & Chinese] was based on a guaranteed “strike price” of £92.50/ megawatt hours (MWh), in 2012 prices, to be adjusted in line with the consumer price index during the construction period and over the subsequent 35-year tariff period. At current exchange rates, this price corresponds to approximately A$165.
Prices in Australia’s National Electricity Market have generally averaged around A$90/MWh. This implies that, if new nuclear power is to compete with existing fossil fuel generators, a carbon price must impose a cost of A$75/MWh on fossil fuel generation.

You are correct that the economic loss does not equal the money raised from a carbon tax. But it could be higher, as well as lower. For example, a $100,000 carbon tax would raise very little money after the first year, but the cost to society would be very high. There needs to be an examination of the elasticity of utility with respect to carbon emissions.

Alon is correct that it would be possible to remove most private cars from the road without “a big reduction in [people’s] income.” Whether it could be achieved in practice depends partly on whether transit projects can be implemented cost effectively. As this blog has documented, many countries, but the US particularly, are prone to high construction costs.

Additionally, areas whose road network and buildings were largely developed after the invention of the automobile will be more difficult to cost effectively serve using transit.

Zoning reform to allow transit oriented development is something that would clearly provide cost effective improvement. Many transit projects and automobile taxes can be financially justified by benefits of increasing transit mode share such as safety and improved travel times that are independent of global warming considerations.

However, I still think a carbon tax of $480/ton would result in a big reduction in living standards. Private automobile emissions only make up ~17% of emissions in the United States (technically this is the EPA’s statistic for ‘light duty vehicles’).

The dead weight loss of such a high tax will be much higher for emissions sources that do not have such favorable substitutes.

These include air travel, intercontinental shipping, steel and cement manufacturing, meat production. Given that a cost effective method of grid scale storage has not been demonstrated outside of areas with abundant hydroelectricity, this could include electricity generation in the absence of nuclear energy.

I am skeptical that policies to address global warming make sense from a cost benefit standpoint. The cost of climate change and the cost of transitioning to a carbon neutral economy will both be enormous. There is a lot of uncertainty about the magnitude of both, so I don’t think anyone can say with much confidence which will be greater.

in terms of the equitability of a $480/ton carbon tax and it’s effect on personal vehicles I think you’d need to accompany it with concomitant legislation that enacts voucher based exemptions on new and used car sales, and equity vouchers (cash) for those in the bottom six deciles most hurt by the fuel cost increases that would hit them hardest.

What kind of voucher system and why? well saying no to personal cars is a non starter, you’re not going to successfully rapidly deploy at scale a replacement for a product with global market penetration of 2 billion units in use. Sure, manufacture ten million buses over five years, it still won’t make a significant dent, and you can’t successfully drive down car ownership until you’ve scaled out and deployed at least 50 million buses to replace them. (And that is probably not nearly enough buses) you’re not going to get universal participation until you have 5 minute headways everywhere all the time, with app based zero friction dispatch, and no one wants to do that for public transportation, even if the owners of global capital can successfully murder all the 600 million global driving jobs (without incurring massive social unrest) and harvest trillions in profits on the labor savings of using robot slaves to replace the drivers, it’s still an utterly massive lift to deploy a car displacement around the globe at scale.

And displacing all those existing units will take decades. So you need a multi-pronged approach to your voucher system that is appropriately automatically escalated over time.

The first prong is to target is new car sales. The second prong is to target used car sales.
The third prong is to target conversions of existing stock
Prong one, Any car that isn’t a hybrid with at least 1kwh in battery will be subjected to a $1000 fee at point of sale–easily discounted by dealers at first, but this fee increases by $1000 every year, to create pressure on the three-five year auto refresh cycle so that within 3-5 years every manufacturer has flipped to hybrids being the default, and has begun building battery supply chains and putting in long term orders that increase the manufacturing capacity of batteries.

Accompanying this is an automatic point-of-sale dual rebate (for any car that is a hybrid with at least 1 kwh in battery of $5000) (on top of any other additional tax credits that are fairly ineffectual since it relies on waiting months and months to get your reward), and the second rebate is simply an unconditional check to the buyer of $1000 from the government for buying a more carbon friendly car, each amount goes up by a $1000 each year.

Any dealer that doesn’t offer the maximum possible set of various manufacturer/dealer discounts on rebate eligible cars would be subject to a $50,000 fine per vehicle. we don’t want a Hyundai Kona electric situation where the dealers jacked up the sticker price and stopped offering standard discounts.

What you want these rebates to do is to make conventional cars more expensive year over year, and modern cars less expensive year over year.

The minimum standards escalate as well, so after five years, hybrids would no longer eligible and would now subject to the (now) $6000 fee. Instead, Plug in Hybrids would now be the minimum standard to get the dual vouchers (of vouchers that are now $11,000 and cash that is now $6000). the amount of batteries a PHEV cars must have increases year-over-year to stay eligible for the vouchers (and not be subject to the fee) and eligible for the dual vouchers, so start eligibility of PHEVs at 12 kwh, and add 4kwh of capacity per year to stay eligible. This is designed to give the manufacturers time to scale up battery production and deployment, but by the end of the PHEV five years, the vast majority of cars manufactured would have to have at least 28 kwh of batteries.

And at this point, five years out, every model of conventional car would be $6,000 more expensive than without this system, and those fees are what are funding much of the voucher system (accompanied by funding from the carbon tax as well).

Then the final shift, after five years, is that PHEVs are no longer eligible and only BEVs are eligible. At this point, all conventional non-compliant cars would be $11,000 more expensive than than without this system, compliant cars are $16,000 less expensive than they would be with this system, and purchasers of compliant cars are rewarded with $11,000 in cash as well.

It’s designed to break the back of gasoline car manufacturing quickly while accelerating uptake of better alternatives.

Aside, a new 2019 development has the Koch intellectual complex pushing hard a narrative about the wear of rubber tires putting debris into the atmosphere being the cause of virtually all smog (not tailpipe emissions), and liberal journalists have all swallowed this fairy tale enthusiastically, so lets just ignore the whatabout propaganda strategies and assume correctly that eliminating two billion vehicles’ tailpipe emissions would limit carbon entering the atmosphere.

But there’s a huge equity problem with all of the above so you have to address the existing stock and used car market.

The second prong is the used car market, not much can be done here, but maybe we can work out voucher programs that encourage uptake of more compliant cars and penalize the worst offenders (hummers and SUVS and big pickup trucks) and also set incentive and subsidy systems in place that would nudge used car dealers to put in emission reducing upgrades on vehicles they stock. If the above system is going to flood the new car market with hybrids and PHEVs, a similar smaller scaled voucher and fee system in the used market would make sure that the hybrid and pheve cars are the clear winners for buyers, which would preferentially keep them on the road longer and in larger proportions than non compliant stock.

The third prong is the existing car stock. The Obama administration tried the cash for clunkers program as a good equity solution, which anecdotally got a lot of nasty cars off the road quickly from my pov, but which the Koch intellectual complex has successfully gaslit everyone into believing the program was some sort of net negative. So the best solution—paying people large cash rewards for retiring/destroying the engines of the worst emitting, oldest non-compliant cars—is probably not going to gain popular support in some countries. But it’s a possibility to deal with the existing stock, and probably a strong and efficient solution in many countries around the globe. Imagine cash for clunkers on steroids, a consumer gets a $10,000 voucher for retiring their twenty year old heavy SUV, that combined with all the above vouchers puts them into the new car market that they usually would not be able to participate in, it would probably acceptably accelerate the transition of the existing stock. but if the Kochs have successfully destroyed this kind of program, that leaves us with heavily subsidizing moonshot conversion techniques and technologies. We’re better off just getting people to switch, but offering ways to convert is smart too, it might be especially valuable to have large subsidies for the conversion of commercial and agricultural vehicle stock.

No, why should there be a voucher system? The bottom six deciles don’t buy more gas than the top four. Relative to overall consumption, fuel is a constant percentage of household spending in the bottom nine deciles of American income. It only goes down in the topmost decile. So this has approximately the same progressivity as a sales tax; liberal American cities pass sales tax increases by large margin when it goes to ballot, and European sales taxes are a lot higher than American ones while the role of the tax and welfare system in redistribution is more egalitarian than in the US.

The big issue is the us vs. them mentality. Drivers are the us-group, defined around a narrow class of patricians in the 1910s and 20s who led American suburbanization and a very large group of middle- as well as working-class people who over the generations have aspired to live the same lifestyle. If people in the latter group are taxed, this is clearly regressive; if people with equivalent income are taxed over something that does not define mainstream American (and to a large extent European) culture so much, this is fine. If people in that group are inconvenienced, say if people with disabilities need to drive, society must adapt to them; if other people with equivalent income are inconvenienced, say if people with disabilities need reliable step-free transit, they must adapt to society. And if people in that group riot, it means there’s social unrest and policy must be reversed; if people with equivalent income who are not so socially important riot, it means the state must preserve law and order at all costs.

Income taxes aren’t that easy to avoid either, unless tax law is set up explicitly to protect whichever company fundraised the most money for the senior members of Ways and Means. Srsly, the loophole Apple and Amazon use to avoid paying corporate tax is pretty easy to close at the US end, the US just refuses to close it.

Get out more. All sorts of companies manage to avoid income taxes on high sales. If you tax the sales they can’t avoid it. How ever they manage to avoid it. And it solves all the whining and moaning about how awwwful it is that the income is taxed twice.